In an article in the May/June edition of Foreign Affairs, the foreign policy professor Walter Russell Mead compares the current era of economic dislocation and political fall-out with the 35 years after the American Civil War (from 1865 to 1900) when similar upheavals due to the industrial revolution were being experienced.
Then, as now, rapid technological, economic and social change created dislocation, financial crises and inequality that the existing institutions and political leadership could not find answers to.
In fact, the gains in productivity from the new economic model would and should lead to a golden age of prosperity and freedom but only after society had been completely remade.
Right now, the information or digital revolution is causing the same kind of disruptions; expected productivity gains have yet to come through; there are some big winners and many losers who are making their unhappiness felt by electing populist parties.
Just as the world of work changed completely in the industrial revolution so we are currently witnessing the replacement of the stable corporate career with the uncertainties of the gig economy. Eventually, education, health and welfare services will need to be transformed to meet the needs of this new society. “It is likely that before the adjustment is finished, every institution – from the state to the family to the corporation – will have changed in fundamental ways,” says Mr Russell Mead
Banks can’t leave it until all the pieces finally fall into place to do their planning. But they can attempt to identify and serve both the new consumer and the new worker. In the first case these are people that expect online financial advice at the click of a mouse and a choice of credit options to be instantly available any time they make a purchase large or small.
In the case of the new worker, Simon Healy, the financial services industry director for Unisys, points out that already in the UK a large proportion of small businesses are made up of self-employed freelancers operating in the gig economy. With Open Banking there is huge scope for fintechs and banks to provide packages combining accountancy, cash-flow monitoring, current and savings account to help these new workers manage their finances, pay their taxes and build up a pension.
Banks need to think through all the wider changes taking place across society – in health, education and welfare – and position themselves for this new world.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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